California Partial Sales/Use Tax Exemption for Mfg & R&D Equipment

California Partial Sales/Use Tax Exemption for Mfg & R&D Equipment

Funds manufacturers in California through sales and use tax relief tied to production and development equipment.

Eligibility · United States · US-CA

The California Partial Sales and Use Tax Exemption for Manufacturing and R&D Equipment is a statutory exemption from a portion of California's sales and use tax on purchases or leases of qualified tangible personal property. Authorized under Revenue and Taxation Code section 6377.1 and most recently extended through June 30, 2030 by AB 398, the exemption provides an effective rate reduction — not a refund or grant — applied at the point of purchase by the buyer furnishing Form CDTFA-230-M to the seller. Eligible purchasers are manufacturers operating under NAICS codes 3111–3399, businesses engaged in research and development under NAICS 541711 or 541712 (biotechnology; physical, engineering, and life sciences R&D), and electric power generators and distributors.

To claim the exemption, three conditions must all be satisfied: the purchaser must be a qualified person in an eligible business category, the property acquired must be qualified tangible personal property (generally machinery, equipment, and certain computers used primarily in the exempt activity), and the property must be used primarily in manufacturing, R&D operations, or electric power generation and distribution in California. The exemption is self-executing — it reduces the tax owed at the time of purchase rather than requiring a post-filing credit claim — making it immediately valuable for capital-intensive manufacturing and laboratory equipment acquisitions. Estimated value ranges from a few thousand dollars on small equipment purchases to potentially hundreds of millions of dollars across large manufacturing operations, based on the exemption rate applied to the purchase price.

This instrument is classified as a tax exemption, not a competitive grant or discretionary award program. There is no application, no award cycle, and no competitive scoring. California manufacturers and R&D firms planning significant equipment investments should confirm NAICS code alignment before purchase and retain the CDTFA-230-M form as documentation. The sunset date of June 30, 2030 means planned purchases beyond that horizon should be monitored for legislative reauthorization.